US credit card defaults jump to highest level since 2010.

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In the year Defaults on U.S. credit card loans are at their highest level since the 2008 financial crisis, indicating that the financial health of low-income consumers is deteriorating after years of high inflation.

Credit card lenders took on $46 billion in bad debt in the first nine months of 2024, up 50 percent from the same period last year and the highest level in 14 years, according to industry data compiled by Bank Rigdata. Closely watched write-offs are a significant measure of credit stress when a borrower decides they can’t repay the loan.

“High-income households are good, but the bottom third of America’s consumers is the third,” said Mark Zandi, head of Moody’s Analytics. “Their savings are now zero.”

The sharp increase in defaults is a sign of how consumers’ personal finances continue to improve over the years. High inflationAnd that the Federal Reserve has left borrowing costs high.

Banks haven’t reported their fourth quarter numbers yet, but the first signs are that many consumers are falling behind significantly on their debt. Capital One, the U.S.’s third-largest credit card lender, behind JPMorgan Chase and Citigroup, in 2010. Through November, it said its annual credit card charge-off rate, which is a percentage of its total loans estimated to be nonperforming, was 6.1 percent. percent, up from 5.2 percent a year earlier.

“Consumer spending power has decreased,” said Odysseas Papadimitriou, head of consumer credit research firm WalletHub.

US consumers are ready to emerge from pandemic-era lockdowns flush with cash. Credit card lenders have previously been seen as safe borrowers by signing up customers who may not qualify based on income, but whose bank accounts are flush with cash.

Credit card balances soared, adding a total of $270 billion between 2022 and 2023, and pushed the number of US consumers with credit card debt past 1tn by mid-2023.

That cost, along with supply chain disruptions caused by the coronavirus, has driven inflation, prompting the Fed to raise borrowing costs starting in 2022.

Higher balances and interest rates have left Americans unable to pay their credit card bills in the last 12 months ending in September with $170 billion in interest payments in full.

That’s more than enough cash in consumers’ bank accounts, especially for low-income consumers, and as a result, many borrowers are struggling to repay their credit card debt.

Officials are only predicting that the US central bank will cut interest rates as quickly as possible in 2025 after this year’s rate cut. Half a percentage point Rate cuts next year compared with a forecast of 1 percentage point three months ago.

In a sign of how consumers are struggling after writing off nearly $60 billion in consumer credit card debt last year, another $37 billion remains on consumer cards at least a month later.

Credit card delinquency rates peaked in July, but fell slightly and were a percentage point higher than the average in the year before the pandemic, according to data from Moody’s.

“Rejections portend more pain ahead,” says WalletHub’s Papadimitriou.

Donald Trump’s threat of wide-ranging tariffs, which could raise inflation and interest rates, “will be two problematic things for the consumer in 2025,” he added.